Financial Analysis

In diligencing a startup, analyze the financial statements to understand the business better.

Here are key items to check:

– Where does the revenue come from?
– What could stop or halt the revenue?
– How far is the company from profitability?
– How much cash is on hand and, given the burn rate, how much runway is available?
– What costs can be variablized down in case of a drop in business?
– Check the accounts receivables to see how fast customers are paying their bills.
– How much debt is on the balance sheet and what does it cost or when will it come due?

In each category, start with the big numbers and then work your way down.

For items that look out of the norm, ask the founder or CEO.

See how much the team knows about their numbers and if they have a strategy for improving them.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

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Disclaimer:
Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.